We may soon find out exactly how much the tax deduction for charitable giving prompts people to donate to nonprofits, if President Obama’s proposed jobs bill goes through. As explained in Lisa Chiu’s September 12 article in the Chronicle of Philanthropy, the charitable deduction is just one of the many itemized deductions that would be limited to a 28% writeoff in the higher-income brackets.
For an impassioned (to put it mildly) discussion of the pros and cons of limiting this deduction, see the “Tax the Rich More? Or Less?” article by Jan Masaoka in Blue Avocado and the comments that follow. The crux of the debate seems to be between those who believe that tax deductions either aren’t or shouldn’t be a major motivation for giving among the wealthy, and those who think that it is — and that, with all the struggles nonprofits are already going through, picking on this deduction could just make matters worse.
I put myself in the latter camp, largely because of the following statistic, as covered in my December 2010 blog post: More than 20% of all charitable giving for the ENTIRE YEAR occurs on December 30th and 31st.
Maybe the tax deduction isn’t the main motivation for giving, but the deadline clearly gives potential donors a major nudge. Without that deadline, I’m betting (as a seasoned procrastinator) that all those good intentions will be put off month by month by month.